Taseko scoops up US$11.4M BC copper buy

Yellowhead owns the Harper Creek copper-gold-silver project in British Columbia, where the company already operates the Gibraltar mine.

CEO Russell Hallbauer said Yellowhead was being acquired at a cost of "half a penny per pound of copper" in the reserve base. The project holds proven and probable reserves of 3.6 billion pounds of recoverable copper, accompanied by 370,000 ounces gold and 15.6Moz silver.

"This transaction supports our long-term strategy of conservatively growing our production by way of meaningful and manageable acquisitions."

He added the Yellowhead project increased the company's near-term pipeline of 100%-owned reserves to nine-billion pounds of contained copper.

"When Yellowhead is in production, and combined with our producing Gibraltar mine and near-term production from Florence, we anticipate that our annual copper production would exceed 320Mlbs per year, making Taseko one of the largest copper producers in North America," he said.

A feasibility by Yellowhead on Harper Creek outlined a 70,000t/d concentrator at total pre-production capital costs of about C$1-billion and an average operating cost of US$1.46/lb copper.

Using $3/lb copper and an 8% discount rate, the project has a pre-tax net present value of C$1.1 billion.

Under the terms of the transaction, each Yellowhead shareholder other than Taseko will receive 1.1484 Taseko common shares for each Yellowhead common share held, representing payment of C$1.00 a share based on Taseko's five-day volume-weighted average price for the period ended December 3. The all-scrip deal, after taking into account the existing 21% ownership, will be settled through the issuance of 17.3-million Taseko common shares.

Hallbauer said the Taseko team had been assessing engineering alternatives over the past few years and believed that it could enhance the project's economics. Based on the current feasibility study, copper production would average about 170Mlb for the first three years after start up, including significant gold and silver by-products.

"The project is at a stage where we can advance technical work and reinitiate permitting activities using internal resources, without significant cash expenditures. There is potential for this project to be shovel ready soon after our Florence copper project begins commercial production," Halllbauer said.

The company is currently in the construction phase at Florence in Arizona, where the Phase 1 facility is scheduled to produce its first copper cathode before the end of 2018.

The transaction requires the approval of the Supreme Court of British Columbia and the approval of at least two-thirds of the votes cast by Yellowhead shareholders and most of the votes cast by Yellowhead shareholders excluding Taseko, at a special meeting of Yellowhead shareholders to be held in January.

Taseko said Matco Investments, which held about 45.5% of the outstanding Yellowhead common shares, had entered into a hard lock-up agreement with Taseko. A director who held about 7.2% of the outstanding Yellowhead common shares had also entered into a customary support agreement under which they had agreed to vote their Yellowhead shares in favour of the arrangement. Together with Taseko, the locked-up shareholders hold 73.7% of the issued and outstanding Yellowhead common shares.

Yellowhead jumped as much as 135% on intraday trading in Toronto Tuesday, reaching a high of C94c before settling at 89c, taking its market value to $16.98 million.

Taseko, which has lost 70% in value over the past 12 months, on Tuesday gave back another 6.59% to 85c, resulting in a market capitalisation of $194.14 million.